The act of running a business can be described with a few colorful words: stimulating, challenging, lucrative, and maybe even a little bit fun. But what is absolutely not fun, entertaining, or jolly for a business owner is to be sued by an employee. Lawsuits are costly, time-consuming, and emotionally draining. Even more, they can also drag the reputation of the business you’ve worked so hard to build through the mud.

Over the last 20 years, lawsuits against businesses have increased by 400%. Especially if you’re not a large, multi-national corporation, don’t think you can skate by without being sued. Many employee lawsuits are brought against small companies that have fewer than 100 employees, which is why it’s essential for business owners, no matter the type of business they own, to protect themselves.

Why Employees Sue

A study of 446 closed claims reported by small- and medium-sized enterprises revealed that 19% of employment charges resulted in average litigation costs averaging $125,000. This includes expenses related to both defense and settlements.

Why would you possibly be sued? Well, there are a lot of reasons why a current or former employee might try to take you to court. The most common reasons include:

●     Workplace harassment

●     Violation of federal workplace discrimination laws

●     Salary and wage violations

●     Wrongful termination

●     Employee injury due to negligence by the employer

Any employee who feels they have been unfairly terminated or disciplined can be tempted to sue, or they may sue because they don’t feel managers addressed complaints adequately. The point is, you must take steps to ensure you’re ready in case you ever get sued by an employee. This is definitely not an area you want to be blindsided — you could end up losing the business you have worked so hard to create.

Avoid a Lawsuit

The best-case scenario for any business is to avoid lawsuits altogether! The issue with this strategy is that you can’t control what other people do; you can only control your business and its practices. Remember, an employee can sue you whenever they want and whether they have a legitimate complaint or not.

So, what can you do? First, create clear and concise management and employee policies. Draft policies and procedures in the workplace that can safeguard you from lawsuits. Make sure your staff understands the policies, and provide them with an employee handbook or manual to ensure they have all the information they need to perform their jobs well and without putting anyone at risk.

If you’re not sure where to start with a policy manual, here are a few considerations to cover:

●     Work safety and health policy: These policies highlight safety procedures and clearly spell out the responsibilities of all employees when it comes to workplace safety. If you own a business where people come into contact regularly with customers or patients who can be aggressive and abusive, such as a private healthcare practice or nursing facility, then this is one area you must dedicate a lot of attention to. Because your employees have the right to work in a safe environment, invite an occupational health and safety specialist to assess the conditions in the workplace for your employees so you can create policies to keep everyone safe.

●     Discrimination, harassment, and bullying: As an employer, you can be held responsible for acts of harassment and discrimination in the business even if you weren’t involved! That’s why it’s important to minimize this risk by documenting that you’ve taken reasonable steps to prevent these things from happening. You need a comprehensive policy that communicates to employees what constitutes discrimination, inappropriate behavior, sexual harassment, and bullying.

●     Code of conduct: This can set standards of behavior for everyone in the workplace. It includes issues such as mobile phone use, dress code, use of company property, and dress code. Outline behavior that is unacceptable in your business so you can manage it if it occurs.

●     Leave policy: If your business has seasonal busy periods, it’s valuable to have a leave policy on the books. This includes blackout periods as well as increased notice periods for any employee who wants to request time off during busy times of the year.

●     Grievance policy: You will likely need to deal with a dispute in the workplace at some point. A grievance policy can act as a tool for your employees to understand what they need to do to deal with a complaint.

It’s definitely a good idea to consult with an employment issues attorney who can draft up these policies for you in order to make sure you’re protected. They can also create any legal contracts you need to cover all your legal dispute bases. It’s also not a bad idea to have a lawyer in your corner to consult in uncertain circumstances, just in case!

Get Incorporated

Even when you take steps to keep from being sued, you can’t control everything. One important step for you as a business owner is to take is to incorporate your business.

Incorporating your business protects you personally from any financial settlements your business may be ordered to pay. You separate your personal finances from your business finances so that if you’re sued, the opposing side can only sue for assets associated with your business — not your personal bank accounts, properties, or other assets.

Get Insured

Few things in the world fill a business owner’s heart with joy as much as the words “insurance coverage.” It’s the most adult thing ever, but it helps to give you peace of mind. Sure, insuring your business won’t stop you from getting sued, but it can help you to cover liability costs and legal fees in the event you are.

There are a wide range of liability policies available to business owners. Most businesses choose a general liability insurance plan to help protect them against lawsuits brought by employees if they are injured in the workplace. Discuss your options with an insurance broker to find out what kind of insurance best suits the needs of your business.

The Bottom Line

As a business owner, you are responsible for protecting your business and your personal assets in the event of a lawsuit by an employee. By taking the right steps now, you can help to defend your business against the financial risks that come with a lawsuit, painting a much brighter and stress-free future for your business and making it a better place for your employees in the process.